The fat lady may be singing, but some are saying it is not necessarily over for Geneva Steel LLC.
On Tuesday, the Vineyard-based company announced a potential lender would not extend a $250 million financing package, leaving the fate of the company in the hands of a bankruptcy court judge and the company's secured creditors.
Since early spring, Geneva had been actively engaged in negotiations with Germany-based Deutsche Bank over a new loan and business plan that would have rescued Geneva from a second round of Chapter 11 bankruptcy proceedings, according to bankruptcy court documents.
The $250 million loan would have allowed Geneva to purchase an electric arc furnace, pay off its creditors and convert to a mini-mill, restoring roughly 1,100 jobs.
But even the promise of a cheaper way of making steel, combined with the chance that the new loan would have been guaranteed by the federal government, was not enough.
"We're at the end of a chapter, near the end of a book," said Joseph Cannon, Geneva's chairman. "I'm not ready to say that there's nothing that can be done, but it's pretty grim-looking."
Calls to Deutsche Bank seeking comment were not immediately returned.
Geneva's most recent business plan promised to restore the mill as one of the lowest-cost producers of steel in North America, turning the company's operations back to cash-flow positive, Cannon said.
Instead, Geneva now must try to come up with an acceptable restructuring plan for its two biggest secured creditors — the federal government and CitiCorp USA, which it owes more than $108 million.
Ken Johnsen, Geneva's president and chief executive officer, said it was unlikely another lender could be found before a Nov. 15 bankruptcy court deadline.
"What this means is, we have to sit down with our existing secured lenders and work out a mutually agreeable approach to what happens to Geneva Steel," Johnsen said. "That can range from the sale of the company to breaking up the company in parts."
Those parts include a pipe mill, continuous caster, rolling mill and other facilities in which the company sunk roughly $400 million in an effort to modernize during the 1990s.
"Some parts might stay in their location; most of it would be moved," Cannon said.
Kelly Hansen, financial secretary of Local Union 2701 of the United Steelworkers of America, said it appeared doubtful a loan would be secured as negotiations dragged on.
"The bank's decision comes as no big surprise. We would have liked to see Geneva continue in the future. Geneva has provided a lot of good jobs for people in this area," Hansen said.
Michael Locker, president of Locker Associates, a New York City-based consulting firm whose clients include domestic steel companies, also is not surprised Geneva did not receive its loan.
"Everybody's skittish right now about lending, but steel lending is very hard unless you have a big collateral base that allows them to feel very secure," Locker said.
Even with President Bush's recently enacted tariffs raising the price of imported steel, lenders are wary of steel companies.
"Prices have gotten much better, especially for flat-rolled (steel), which is what Geneva was involved in, but the economy is soft, demand is light and people are stretching payments out, and there is just a lot of stress in the economy in the areas they sell into," Locker said.
Nancy Gravatt, a spokeswoman for the American Iron and Steel Institute, a trade group representing domestic steel producers and based in Washington, D.C., said it is disappointing banks are not lending to steel companies.
"That is a negative message, and really just at the time when we feel like the president has taken decisive action to say this is an industry worth preserving. We don't want to see our industry go the way of OPEC and see our valuable domestic steel industry go offshore," Gravatt said.
Since 1997, 35 domestic steel companies, including Geneva, have filed for Chapter 11 bankruptcy protection.
Geneva has been a major employer and tax-base provider in Utah County since it was built by the U.S. government during World War II.
Historians say Geneva's inland location was selected out of fear of a Pacific coast invasion or closure of the Panama Canal. Such worries increased after the Japanese attacked Pearl Harbor in December 1941. Construction on the plant lasted from 1941 to 1944.
The federal government sold the plant after the war to U.S. Steel.
At the height of its operations, during the early 1960s, the company employed nearly 8,000 workers, according to James Wood, interim director of the Bureau of Economic and Business Research at the University of Utah.
Cannon led a group of investors to buy the steel mill in 1987 for $40 million from U.S. Steel. Under Cannon's tenure, the mill employed 2,850 people.
Geneva was considered one of the state's biggest employers, accounting for 1 percent of the total personal income of the entire state of Utah, the highest of any non-governmental entity including Kennecott, according to one study cited by Cannon.
Yet since 1995 the company suffered severe annual net losses, resulting in a Chapter 11 bankruptcy filing in 1999. The company successfully emerged from that bankruptcy in 2001, only to file again a year later.
Locker said it is still possible a potential buyer could purchase the mill under a Chapter 7 liquidation proceeding.
"Somebody can still buy the assets and restart it free and clear of a lot of the liabilities they are now encumbered with — for instance, some of the legacy costs," Locker said.
That's what happened to bankrupt Ohio steel maker LTV Corp. last year when International Steel Group stepped in and took over operations.
"They have been able to restructure their facilities and lower their cost on a cold-rolled product by $156 per ton," Locker said. "They hired a new work force, negotiated a new labor agreement with the steelworkers. That's a model of what could happen to Geneva. I don't think it's the end."
Yet LTV did not require a chunk of new capital to restart operations, like the $100 million Geneva would need to purchase an electric arc furnace.
Still, Cannon seems reluctant to let go.
"To say that this is the end of Geneva is not right," he said. "I think that a deal could get done that would make everybody reasonably happy here, but it's hard."
E-MAIL: danderton@desnews.com